FAQ - Income Investing For Nomads

Frequently Asked Questions

Below I’ve answered a number of common investing questions to help keep you moving along.

This is a current work in progress, so the ones I haven’t yet answered are listed at the bottom.

If you don’t see your question, shoot me an email at tim@incomeinvestingfornomads.com and I’ll get it added to the list.

I’m not a nomad. Is this right for me?

By nomad, I mean people who prioritize experiences, adventure, and personal growth over material possessions and traditional stability.

Love of travel is a common nomad trait, but that can look different depending on the person. Some people take a few trips a year while others change locations every month. Some are content in a cultural hub like NYC.

I live in van with my girlfriend so we can go where we want with our home and cats in tow. If my investment strategy helps you fund a better and more fulfilling life, that’s all that matters.

What’s income investing, and how does it work?

Income investing prioritizes income generation over long term capital appreciation. This is ideal if you’re looking for a passive income stream without cashing in your portfolio assets.

Instead, these assets continue to generate more income from month to month. You can begin taking disbursements short term or wait until retirement. This post has more details on how income investing works.

If you’d like to hear more about what income investing can do for you, head over here.

Where should I start with investing?

If you’re new to investing, I highly recommend exploring the resources on our Start Here page.

First and foremost, you want to make sure that you set up a solid foundation to be successful with investing. This post gives a good overview of the the investment planning process.

How much money do I need to start investing?

Unfortunately, there’s no one-size-fits-all answer other than saying to start with what you have. A more specific number can be determined by evaluating several personal factors. You can find those here.

But a better question might be, “How much am I willing to contribute to an investment account?”. This is pretty much the same thing as how much you’re willing to put towards retirement.

Even if you only have a few hundred bucks, many brokerage accounts have decreased their minimum investment to attract customers and remain competitive.

Should I invest on my own or seek professional help?

I personally believe that everyone should take their finances into their own hands. No one’s going to be as concerned with your best interest as much as you will.

The idea of managing your own investments might seem scary at first, but it gets easier with the more time and effort you put in. I think it’s scarier not knowing how to manage my own money or never being able to retire.

If you want some pros and cons of self managing an account versus hiring a fund manager, check out this post.

You could also do a hybrid strategy by doing the trades on your own while getting advice from someone more experienced. I’m happy to be that type of resource if you’re interested in picking my brain.

What brokerage account should I use?

I’ve used TD Ameritrade, ETRADE, Vanguard, Robinhood, and Charles Schwab. I’m actively managing portfolios in all of these except ETRADE at the current moment. Schwab is my personal favorite.

That doesn’t mean that it will be the same for you. I would suggested looking at the most commonly used brokerage accounts from an income investing point of view. Compare their features to your needs.

Whichever one fits best is the one you should go with. If you aren’t happy, you can always open another one and move your assets.

How do I choose the right investment strategy for my goals?

The best strategy begins with a thorough planning process. Here’s a post that walks you through the 10 steps that set you up for investing success.

A good place to start is knowing about the different types of investing. This post outlines the pros and cons of 7 different approaches.

After that, you need to educate yourself on the different types of investment vehicles, how to manage risk, and portfolio diversification to determine an investment plan that’s right for you.

Can income investing be a reliable source of passive income?

Yes! However, you do need to initially put in some level of research and effort to be successful with creating a steady income stream.

Additionally, you should monitor your investments and rebalance your portfolio regularly to maintain optimal performance.

What are the different types of investments available?

There are a lot of different types of income-generating assets that you have to choose from. I’ve outlined each of them in this post.

Focus one one or two to start. Learning how the class works and how to find and select good assets within that category. Make sure assets line up with your financial goals and preferences before committing.

Should I invest in stocks, bonds, or other asset classes?

You should invest in whatever investments line up with your financial goals and personal preferences. Get familiar with the different types of investments, so you have a better idea of where to start.

Just a suggestion, but you might want to begin with preferred stocks since they pay good dividends and have low risk for stocks.

Should I focus on dividends, rental properties, or other income sources?

Dividends are never a bad thing to focus on, but they aren’t the only option to earn passive income. If you’re interested in rental properties, but want less headaches look into REITs.

Aside from that, you should choose whatever investments line up with your financial goals and personal preferences. Check out the different types of investments to determine which ones suit your needs.

I really like close-ended funds and BDCs, but EFTs might be more your thing.

What is the role of diversification in investment portfolios?

Diversification is mostly known for reducing risks and creating more consistent returns, but it has several other benefits. You can check these out here.

The main goal of diversification is to avoid putting all of your money into just a couple of assets. This helps protect your portfolio from significant losses that might occur if one investment or sector performs poorly.

How can I diversify my income investment portfolio?

To diversify your portfolio, you need to spread your investments across different asset classes, sectors, or geographic regions.

You’ll first need to identify which ones line up with your risk tolerance and financial goals. From there’s it just a matter of researching the available assets that meet your criteria and buying them.

How do I open an investment account?

First you need to determine the type of investment account that you’d like to have. Then choose a brokerage firm that will be able to serve your needs. fees, investment options, customer service, and online tools.

Most brokerages allow you to apply online via an application process. You’ll need to provide personal information, investment objectives, and financial details.

Before starting it will be helpful to have documents like your passport, driver’s license, social security number, and proof of address on hand.

How do interest rates affect income investing?

Interest rates play a significant role in investing because they affect many areas. Inflation and interest rates are directly correlated. Central banks adjust interest rates in response to inflation.

They’ll raise rates in an attempt to curb inflation, but this also leads to higher borrowing costs for businesses and consumers. When inflation is lower, rates will fall making borrowing costs more favorable.

When interest rates rise so do the rates of fixed-interest securities, making them more appealing. Dividend-paying equities become less favorable due to their lower yields by comparison. The reverse is true when interest rates go down.

Real estate acquisitions become less favorable with high interest rates, but you do earn more on savings accounts. Again the reverse is true when rates go down.

What are the tax implications of investing?

Investing has various tax implications, depending on the type of assets you hold. The type of taxes you’re subject to also changes depending on your strategy like whether you hold or sell an asset.

The length you hold something can change your tax bracket and each country has different tax laws that may come into play if you hold any foreign asset.

You should make yourself familiar with the different tax considerations and consult a tax professional for your specific situation. FYI tax deferred accounts make it possible to put off tax concerns until later down the road.

What are the risks associated with investing?

Life comes with risks and investing is no different. There are a bunch of different risks associated with investing and a few that are specific to income investing.

The list is too big to discuss here, so check out this post for details on each one.

How do I manage investing risks?

The first step to managing risks is to become aware of the components that are involved. Make yourself familiar with each risk type.

Then you can come up with a plan to mitigate each risk. Having a good risk management plan is vital to being able to generate healthy returns.

Are there any specific investing strategies or techniques I should consider?

Everyone will come up with their own personalized strategy over time. But if you’re new to investing or looking to improve, I suggesting starting with a solid foundation and having clear goals in mind.

This post has a bunch of strategies and techniques to add on that will provide great results. If you combine those with a focus on income generation with a little value investing, you’re going to be sitting pretty.

How often should I review and adjust my investment portfolio?

When you’re starting out, you may have to fight the urge to compulsively look at your portfolio. I’d say to check in once a week so you can start to get a feel for how things move and the patterns that play out.

Adjustments will depend on your goals, risk tolerance, performance, market conditions, changes in live events, and tax considerations. This could happen once a month, every 6 months, or even once a year.

Periodic check-ins keep you up to date and aware of changes that might put assets outside of your predetermined criteria. When that happens, it’s time to take strategic action to bring things back into balance.

What are the potential returns I can expect from investing?

Your return will depend on a lot of aspects like allocation strategy, diversification, time horizon, risk tolerance, market conditions, and whether you reinvest your income payouts.

I’ve put together 4 different portfolio scenarios based on different levels of risk. Level 1 is the lowest risk while a level 10 is the highest. Even if you’re completely risk averse, you can still make 10.24% yield annually.

These results are based on the specific asset picks and allocations when I put these portfolios together. If you want a current personalized allocation, get on a coaching call.

What is the potential level of income I can expect from income investments?

The income generated by your account will depend on things like which assets you hold, allocation strategy, diversification, time horizon, risk tolerance, market conditions, and whether you reinvest your income payouts.

I’ve put together 4 different portfolio scenarios based on different levels of risk. Level 1 is the lowest risk while a level 10 is the highest. The chart below should give you an idea of what level of income you can expect.

Keep in mind that these results are based on the specific asset and allocations when I put these portfolios together. Also the income below is what gets generated initially, but that number goes up with reinvestments.

Risk is rated from 1 (Low) to 10 (High).

How can I reinvest income to maximize long-term returns?

If you own stocks and funds that pay dividends or bonds that pay interest, you can enroll in dividend reinvestment plans (DRIPs) in your brokerage account.

DRIPs allow you to use the dividends and interest to purchase additional shares or bonds automatically of the same funds. But not every asset has DRIP available.

For the ones that don’t you’ll have to manually reinvest the payouts. Instead of putting the funds back into the same assets, you may want to consider reinvesting in other assets in accordance with your allocation plan.

When you do reinvest, you allow your assets to compound which will substantially expedite your long term growth and returns. The longer you can let your investments compound, the better.